Tuesday, June 4, 2019

Tuesday Morning Livestock Market Summary - Livestock Traders Search for Support

GENERAL COMMENTS: 
Cash cattle trade is expected to show limited movement Tuesday, although light trade in Kansas on Monday accelerated the timeline once again in the South. Cattle that were traded Monday were sold for $113 per cwt. This is $2 per cwt less than last week levels, and it ties to the market pressure in futures trade recently. More bids are expected in the next couple of days, although it is uncertain at this point if feeders will move into the market before the end of the week, or if the initial early trade will stall the process now that the ice has been broken in cash market activity. Futures trade is expected mixed Tuesday morning with traders focusing on continued underlying pressure as August futures fell below $103 per cwt Monday. Outside market direction is likely to spark some additional market shifts and volatility during early trade. But the direction of initial market moves is not likely to be the dominant direction of market trade through the rest of the session.
Early-week pressure in lean hog trade seems to be the most surprising of the livestock shifts Monday, although the underlying tone of the complex remains extremely weak with growing uncertainty and uneasiness surrounding global trade. The fact that late summer and fall contracts felt the brunt of early-week losses is causing some additional concern that additional downside pressure may be developing across the complex as traders back-peddle from gains in March. The threat of African swine fever continues to be significant and the need to replace pork supplies still exists, but at this point, the question remains if U.S. pork can get back into many of the Asian markets in order to help fill the gap of production lost in those countries. The general weaker tone is expected to remain, although moderate-to-firm short-covering is expected to attempt to push prices higher early in the session. Cash trade is called steady to $1 lower Tuesday morning with most bids $0.50 lower. Expected slaughter Tuesday is at 474,000 head.
BULL SIDEBEAR SIDE
1)
Firm buying in feeder cattle futures is bringing stability to the market, helping to bring needed support back to the weak cattle complex.
1)
Nearby live cattle futures continue to set contract lows, limiting the ability to stabilize the complex despite an extremely oversold market structure.
2)Corn prices eroded slightly in early-week trade, taking less emphasis off of surging corn and feed price levels. This is expected to stimulate additional buyer interest as traders try to align feeder cattle prices with projected production costs.2)Firm early-week pressure in cash cattle prices in Kansas have created additional uncertainty about potential market stability in early June. Monday trade has been very unusual, but the lack of support appears to point to feeders feeling additional downside pressure.
3)Strong gains in rib and belly cuts early in the week helped to regain market support and post triple-digit gains in the pork cutout value.3)
Sharp triple-digit losses in August and October contracts continue to point to strong underlying supplies of hogs, which will be ready for market at the end of the summer. This may add increased pressure in early June.
4)
Cash hog values are showing stability as packer margins have slightly improved in the last couple of weeks. This is helping to not only focus on cash market stability in several areas but is increasing plant speeds, moving additional hogs through the system.
4)
Export market concerns continue to be front and center in most hog market discussions. The continued conflict with China combined with recent imposed tariffs on Mexico continue to impact the potential to move pork supplies around the world the rest of the year.



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